The Surprising Priorities of Small-Business Owners

By Christiana Cefalu

Many small business owners feel a moral obligation to step up their hiring and help bring down the nation’s unemployment rate, a new survey by U.S. Trust suggests.

According to the survey, 66% of business owners say they feel “empowered to make a difference by their ability to create opportunities for others.” In fact, creating jobs is their responsibility, say 72% of business owners. More still, 76%, feel an obligation to keep people employed even if that translates to lower profits. The survey polled 642 individuals with investible assets of at least $3 million.

Despite the sluggish economy, 55% of business owners have started a business, acquired one, and/or made “substantial investments” to expand their business since 2008. And despite well-publicized economic and regulatory concerns this year, just 55% of business owners cited those concerns as reasons for halting business growth. Fewer still said access to credit (28%) or availability of start-up funding (15%) were hindering growth.

All of that clearly bodes well for American business. But, when asked about business planning, it seems the group is neglecting to ensure they’ll be able to make their contributions to society last.

In fact, 55% of business owners have not established a formal succession plan for their business. Of business owners over age 67, 43% have not made such plans. The way Keith T. Banks, president of U.S. Trust, describes it, “many business owners are so caught up in what they are doing that they often don’t envision a world without them in it.” He warns, “by not anticipating risks or a change in circumstances, they unintentionally may put the financial security of their families and employees at risk, despite their best intentions.”

The same inaction is evident when business owners were asked about generational planning, too. Over three-quarters (77%) acknowledge it is important that they leave a financial inheritance to the next generation. But nearly half (48%) are not using any type of trust to protect or transfer those assets to heirs, their business, or charitable beneficiaries. When asked why, 42% said they “just haven’t gotten around to it.”

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There are 2 comments

NOVEMBER 13, 2012 7:33 P.M.

Sheamas Mac wrote:

Great statistics.

NOVEMBER 14, 2012 12:22 P.M.

jim sloan wrote:

This is one of the best Penta pieces. It exactly describes my wife and her small business, an institutional bakery with about 15 employees. She's 57, I'm 68. She feels deeply connected to her wonderful Mexican American workers, all properly documented, some with her help, and worries about what would become of them if something happened to her. Her biggest problem is that nobody has the combination of skills she has -- ability to use her scientific background (especially chemistry) in new product development, her judgment on capital investment and markets, her sales skills, and general entrepreneurial temperament grounded in a bazaar merchant mentality. She can also cut trays of brownies, a difficult task, as well as her best worker, and often does so. She has done things like thoughtful shopping for tangible Christmas gifts for her workers because they spend so little on small luxuries. She thinks her workers are the salt of the earth, and she has no patience for bureaucrats, especially at the IRS and state revenue department, who bugger up her conscientious efforts to pay all taxes in a timely way. From where she sits public sector employees are unmotivated and worthless, while she totally respects the motivation of her own workers, including such moonlighting efforts as landscaping, etc. She sees that the worthlessness of the public sector extends to its current chief, although she voted for him (our household split). She takes the world as she finds it. I am more inclined to look at government policy and observe that trying to squeeze people like us is pretty much the wrong way to go. As an informed investor, I never thought very well of the finance sector guys of the last twenty or thirty years, and I can well understand an effort to clip their wings, but I really can't see policies which have the effect of punishing the success of people like us, who so clearly add value for what they receive.

You are right, finally, about the succession planning problem. I'll try to make her sit down and read this piece, although getting her to sit and read isn't easy.

Jim Sloan

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Richard C. Morais, Penta’s editor, was Forbes magazine’s longest serving foreign correspondent, has won multiple Business Journalist Of The Year Awards, and is the author of two novels: The Hundred-Foot Journey and Buddhaland, Brooklyn. Robert Milburn is Penta’s reporter, both online and for the quarterly magazine. He reviews everything from family office regulations to obscure jazz recordings.